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US: Chrysler studies rebound strategy

By just-auto.com editorial team | 28 July 2006

Chrysler Group chief executive Tom LaSorda on Thursday (27 July) said the company is studying various ways to "rebound" in its home market following a considerable earnings decline in the second quarter and a projected loss for the third quarter.

Chrysler has not posted a quarterly loss in three years, company officials told Dow Jones Newswires.

LaSorda, speaking during a conference call with analysts and reporters to discuss earnings announced earlier on Thursday, said Chrysler would not rule out considering a blue-collar worker buyout programme as a way to strengthen the business in North America, where sales are slipping and production cuts are needed. His statement came after a conference call participant asked whether buyouts similar to a recent General Motors attrition programme are off the table, the news agency said.

The report said Chrysler has fewer active workers and retirees in North America than either GM or Ford, and is not suffering from the billions of dollars worth of losses in the region that its US counterparts have faced in recent years.

After posting an operating profit of $65m in the most recent quarter, down from $695m a year ago, after revenue fell to $15.9bn from $16.7bn in Q2 2005, Chrysler said it expects to lose as much as $600m in the third quarter on an operating basis but return to profitability in the final three months of the year as new-model launches boost sales, the report added.

Dow Jones said LaSorda did not go into detail about planned cost-cutting efforts related to structural costs. Though he described various strategies for reducing raw material costs, much of the company's financial improvement hinges on the success of new model launches and a lessened reliance on sales incentives.

Chrysler is also planning to cut North American third-quarter production levels by between 65,000 to 75,000 vehicles in an effort to reduce its inventory level without having to further increase incentive spending, Dow Jones added. LaSorda said Chrysler's current inventory is "way too high" and the company plans to shave enough production in the third quarter in order to get inventory in the US under 600,000 vehicles.

LaSorda also said that Chrysler has discussed health care costs with the United Auto Workers union and expects to receive concessions no later than the third quarter, the report added.

Chrysler announced on Thursday it had extended La Sorda's contract five years to the end of 2012.